Closing a Corporation
Dormant or dissolved, the tax on winding up, the clearance certificate, and the closing checklist in order.
The short version
- A corporation that stops operating still exists. Until it's formally dissolved, it files a T2 every year, plus its provincial annual return, even with no income.
- Closing properly means: sell or distribute the assets, pay the debts, file final returns for every CRA account, get a clearance certificate, then file articles of dissolution and send CRA a copy with Form RC145.
- Money paid out to shareholders on a wind-up above the shares' paid-up capital is a dividend, taxed in the year it's paid. Assets handed out are treated as sold at fair market value.
- Directors who distribute property without a CRA clearance certificate can be personally liable for the corporation's unpaid tax, up to the value distributed.
- In Ontario, property the corporation still owns when it's dissolved goes to the Crown, and a voluntarily dissolved corporation generally can't be revived.
Closing a Corporation: Tax Checklist
Starting a corporation takes an afternoon and $300. Closing one takes months, a stack of forms and, occasionally, a tax bill nobody budgeted for. The most common mistake is the simplest: owners stop working, stop filing, and assume the company quietly fades away. It doesn't. CRA keeps sending reminders to a company that only exists on paper. Here's how to shut it down in the right order.
Dormant or Dissolved?
| Leave it inactive | Dissolve it | |
|---|---|---|
| T2 every year | Yes, nil returns | Final T2s, then none |
| Ontario annual return | Yes | No, once dissolved |
| Bookkeeping and accountant | Small but ongoing cost | One-time cost |
| Restart later | Easy | Incorporate again |
| Losses and tax accounts | Kept | Lost |
Inactive makes sense for a short pause or when you might restart. For good, dissolve it. Just walking away leads to late-filing penalties, demands to file and, eventually, dissolution by the province, with any remaining assets going to the Crown.
What will closing your corporation cost?
Enter the cash, assets, debts, paid-up capital and retained earnings. The assistant estimates the wind-up dividend, the tax on it, and whether spreading the payout over two or more years would save tax.
The Tax Side of Winding Up
When the corporation distributes its property to shareholders:
- Above paid-up capital is a dividend. For most small corporations, paid-up capital is a few dollars, so nearly everything paid out is a taxable dividend; see dividends from a corporation.
- Capital dividend first. If the corporation has a capital dividend account, that part can be paid tax-free with a Form T2054 election before the payout.
- Eligible part. Any balance in the general rate income pool can be paid as eligible dividends, at lower personal rates.
- Assets are deemed sold. Equipment, vehicles or investments given to shareholders are treated as sold at fair market value, which can trigger recapture or capital gains in the final T2; see equipment purchases.
- Refundable tax comes back. Taxable dividends can trigger a refund of the corporation's refundable investment taxes.
Example: $200,000 in the Bank
An Ontario corporation with $200,000 of cash, no debts, $100 of paid-up capital and $20,000 in its capital dividend account. The owner has no other income.
| Payout | Personal tax (2026, approximate) |
|---|---|
| $20,000 capital dividend | $0 |
| $179,900 non-eligible dividend, all in one year | about $43,300 |
| Same, split about $90,000 in December 2026 and $90,000 in January 2027 | about $10,200 plus about $11,200: about $21,400 in total |
Splitting the payout across a December and a January saves about $22,000 here, because twice as much lands in the low brackets and the basic personal amount gets used twice. The 2027 half costs a bit more because of Ontario's lower dividend credit (and we used 2026 brackets for it, since 2027's weren't out). With other income, the saving is smaller. Run the numbers before you sign the resolution.
The Checklist, in Order
- Stop operating: final invoices, collect receivables, sell what you can.
- Payroll: final remittance, and T4 slips and summary within 30 days after the business ends.
- GST/HST: final return. When registration is cancelled, the corporation is treated as selling its remaining inventory and capital property and owes tax on their value; see closing a GST/HST account.
- Pay every debt, including the corporation's tax. Directors can be personally liable for unremitted payroll deductions and GST/HST.
- Final T2 returns to the wind-up, including the deemed sale of assets; see the T2 return.
- Clearance certificate: after the final assessments, file Form TX19. Distributing property without one makes the person who distributes it liable for the corporation's unpaid tax, up to the value distributed.
- Distribute what's left to shareholders, with T5 slips (and the T2054 election for any capital dividend).
- Clear the shareholder loan account; a balance owing to the company has to be repaid or taxed; see shareholder loans.
- Articles of dissolution. In Ontario, filed on the Ontario Business Registry ($25 government fee when we checked); the Ontario Ministry of Finance's consent is requested automatically. Federal corporations file with Corporations Canada. Annual returns must be up to date first.
- Tell CRA: send Form RC145 to close the business number accounts, with a copy of the articles of dissolution. Until CRA has them, it treats the corporation as still alive and expects returns.
- Keep the records: generally two years after dissolution; see recordkeeping requirements.
Things That Go Wrong
- Dissolving with money still in the bank. In Ontario, it goes to the Crown, and voluntary dissolution can't simply be undone.
- Paying out everything before the final assessment. Then CRA reassesses and comes after the directors.
- Forgetting the GST/HST deemed sale on the truck and the equipment still on hand.
- Losing unused losses. They die with the corporation; use them in the final years if you can.
Rolling the business back into a sole proprietorship or selling it are different routes; see corporation vs sole proprietorship. The overview is on Canadian corporate tax explained.
Closing a Corporation Questions
Does an inactive corporation have to file a T2?
Yes. Until it is dissolved, a corporation must file a T2 return every year, even with no income or tax owing.
How do I close my corporation with CRA?
File final returns for every account, then send Form RC145 to close the business number accounts, with a copy of the articles of dissolution. Without the articles, CRA treats the corporation as still existing.
How is money taken out of a corporation on dissolution taxed?
Amounts paid to shareholders above the paid-up capital of their shares are generally deemed dividends. Part may be paid tax-free as a capital dividend or as eligible dividends, depending on the corporation’s accounts.
Do I need a clearance certificate to dissolve a corporation?
CRA says to get one before distributing the corporation’s property. Without it, the person who distributes the property can be personally liable for the corporation’s unpaid tax, up to the value distributed.
What happens to assets left in a dissolved Ontario corporation?
Property the corporation still owns when it is dissolved is forfeited to the Crown.
Sources: CRA, Closing CRA program accounts; IC82-6 Clearance certificate; Form RC145; Mayo Law, Articles of dissolution in Ontario. Checked October 2026. The Ontario fee, Ministry of Finance consent and forfeiture rules are from a law firm summary of the Ontario rules; confirm on Ontario's site. Tax figures come from our 2026 Ontario rules engine for an owner with no other income. Wind-up dividend rules (subsection 84(2)) are summarized; a wind-up with real assets needs an accountant.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.